Ford Motor Co. (F), the nation's second biggest automaker, said Wednesday its earnings fell 38.5 percent to $1.2 billion in the first quarter as automotive profits fell sharply. The results still beat Wall Street expectations, but Ford said it may have a loss before special items in the second quarter. Its shares rose more than 2 percent in early trading.

Earnings for the January-March period amounted to 60 cents a share, compared with net income of $1.95 billion, or 94 cents a share, in the first quarter of 2004.

Excluding special items, first-quarter earnings were $1.26 billion, or 62 cents a share, compared with $1.98 billion, or 96 cents a share, a year ago. Wall Street analysts surveyed by Thomson Financial had expected earnings of 39 cents per share in the latest period.

Dearborn-based Ford said last week it anticipated beating its own earnings projection of 25 cents to 35 cents per share in the first quarter.

Revenue in the quarter rose to $45.1 billion from $44.7 billion a year ago.

Ford chairman and chief executive Bill Ford credited Ford's three-year-old turnaround effort for the profitable quarter.

"Going forward, we will continue to focus on improving our quality, lowering our costs and delivering exciting new products, as well as taking actions that strengthen our finances, optimize our global footprint and lead to faster development of new products," Ford said in a statement.

Still, the company said that before special items, its second-quarter earnings could range from breakeven to a loss of 15 cents a share.

Ford shares rose 19 cents, or 2.1 percent, to $9.47 on the New York Stock Exchange (search). Ford shares have traded in a range of $9.14 and $16.48 over the past 52 weeks.

Although the picture was brighter at Ford than at General Motors Corp. (GM), which announced a $1.1 billion first-quarter loss Tuesday, Ford reduced its full-year earnings guidance earlier this month by a third to $1.25 to $1.50 per share and maintained that guidance Wednesday.

Ford's U.S. sales were down 4 percent for the first three months of this year. The automaker has enjoyed modest success of its car sales, which are up 5 percent from the year-ago quarter, but truck sales have fallen off 7.9 percent.

Ford's worldwide automotive sector reported a pretax profit of $579 million in the first quarter, excluding special items, down sharply from $1.25 billion a year ago. Worldwide automotive sales for the quarter fell 4 percent to just above 1.7 million vehicles.

Ford's pretax profit from its North American automotive business was $663 million, excluding special items such as charges related to its fuel cell technology business and parts supplier Visteon Corp. That was down from $1.3 billion a year ago.

Despite fierce pricing competition in the North American market, Ford's net revenue per vehicle was $23,059 in the first quarter, up from $22,628 last year. That compares to net revenue of $18,396 per vehicle at crosstown rival GM.

Ford's redesigned Mustang has enjoyed considerable buzz and already has seen sales increase by 17 percent so far this year. But the company's other new entries, including the Five Hundred sedan and Freestyle crossover, have had lackluster sales.

Ford also is selling far fewer of its most profitable sport utility vehicles. Sales of Ford's largest SUVs — the Excursion, Expedition and Explorer — all have fallen by more than 24 percent so far this year, according to Autodata Corp.

Ford Europe reported a pretax profit of $59 million, up from $5 million last year. The improvement largely reflected higher volumes and ongoing cost reductions, Ford said.

In the Asia-Pacific and Africa regions, Ford reported a pretax profit of $43 million versus $28 million last year. Ford said that was partially due to the sale of its 5.1 percent stake in Mahindra & Mahindra Ltd. back to the Indian company.

Ford's Premier Automotive Group — which includes the Jaguar, Volvo, Land Rover and Aston Martin brands — swung to a pretax loss of $55 million in the first quarter after posting a profit of $33 million in the year-ago period. Ford attributed the loss in part to unfavorable currency exchange rates. Also, Jaguar sales were off 21 percent in the first three months of the year, according to Autodata.

Ford's financing arm, Ford Motor Credit Co. (search) , posted quarterly income of $710 million, up from $688 million a year ago. On a pretax basis, Ford Motor Credit earned $1.1 billion, unchanged from a year ago. The company said the improved performance was partially offset by a decline in volume and higher borrowing costs.